[quote=Broker7]Only if Insurance exists…

In a 30% Bank run FDIC is defunct.[/quote]   50 years ago, that might have been true. But today, I don't think so. Why? The politicians won't let the FDIC go belly-up on their watch. They'll simply order "an emergency bail-out" of FDIC; i.e., print more money and dump it into FDIC.   If you think about it, it makes perfect political sense (though not financial sense). Imagine two scenarios: one where everyone loses 30% of the money they had in the bank vs. losing 30% of the value of the money they had in the bank. Under which scenario does a politician stand a better chance of re-election? Inflation is the silent tax that flies under the radar of most people.   Looked at another way, the CPI (along with other measurements) has been manipulated by various presidential administrations for the last 20 years. If we used the same measures for the CPI that we used in 1980, inflation would be reported as running over 10% annually. Compare that to bank deposits paying 3%-4% and going lower. So, every year, people are losing 6%+ of their purchasing power (even more if you consider health care). So, at this rate, in approximately 7 years, people will lose about 50% of their purchasing power. (Imagine the outcry, if a tax bill proposed the same thing!)  

doberman,

You make an excellent point, i'm in agreement with the our loss of purchasing power.  At the point of the fed pumping money into the system to save FDIC, economically speaking, such a move would send the dollar to zero, as it would be the last bullet fired by the powers that be.  It wouldnt matter who's at watch.  Interesting stuff.

Broker7:

I think the downgrade on mbia ambac is coming tommorow or friday.  FGIC just got downgraded today by Fitch, so probably by Moody and S and P  downgrades very shortly.  Watch the bond and stock market tommorow. 

  I just crawled out of my bunker to take a look and despite all the calamity, we're still hanging on by a thread.  A few muni bonds have not defaulted/been declared worthless and fortunately, they are all in my client accounts.  Likewise, the stocks in my client accounts (those who have been foolish enough to stay in the market) are miraculously holding their grossly inflated values.  I consider myself very fortunate.   I can't help wondering who is propping up the sham stock market.  There must be a massive conspiracy to fleece market investors of their cash, because after all, the sky is falling and it's the end of the world as we know it...   ...back to my bunker...

I’m not fishing through this entire thread to see if this has been mentioned so excuse me if i’m repeating a point already made.

  There is historical precedent for the fed to come in and bail out FDIC if events should lead us to that. Back in the early nineties the Fed, in the form of Congress and the Senate, bailed out FSLIC. FSLIC was, for those you to young to remember, a quasi government sister company to FDIC. The resulting legislation dissolved FSLIC and gave eventual control to FDIC. Yet, the troubled banking industry was bailed out and the day was saved   The event that led to the government's action was the S&L crisis. And yes, it darn near dragged down our entire banking system. Much more grave than anything happening today. In the end the only people who got hurt were stock holders in banks seized by an over zealous FDIC in an effort to make themselves look good. The following website will enlighten and disturb:   http://www.meritorpsfs.com/id73.htm   Would our government do this again? Why not?